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Alkaline Water Company Inc (NASDAQ:WTER) is definitely not a name that most cannabis investors are aware of. But they should be.

A premier producer of alkaline drinking water, the company first caught the attention of cannabis investors back in September 2018, when it announced the launch of its subsidiary A88 Infused Beverage Division, Inc. One of the products the company touted at the time was cannabidiol (CBD)-infused water. WTER stock soared and the future looked bright.

Since then, however, Alkaline Water stock has sputtered, mostly because CBD-infused beverages are not legal yet in the United States. Until they are, the company has to wait.

Unfortunately for Alkaline Water Company Inc, investors are not known for being good at waiting. Recently though, WTER shareholders were given a reason to celebrate.

In late August, Alkaline Water’s share price popped when the company announced that it had expanded its CBD product portfolio. Even though those products won’t hit shelves until they’re legal, it’s still an encouraging development.

On September 9, WTER stock soared even higher when the company announced a “transformative deal” to acquire AQUAhydrate, Inc., a private Los Angeles-based company whose investors and board members include Sean “Diddy” Combs, Mark Wahlberg, and Jillian Michaels.

The combined company will launch a line of CBD-infused products aimed at each brand’s unique audience.

Alkaline Water stock investors haven’t had much to cheer about this year. But this new acquisition has resulted in increased exposure, which should attract institutional investors. The deal will also likely result in serious revenue growth in 2020.

WTER Stock Overview

Alkaline Water Company is a leading provider of alkaline drinking water. The company’s “Alkaline88” brand is ranked as one of the fastest-growing alkaline water brands in 2019. Alkaline Water is also one of the top alkaline water companies when it comes to customer loyalty and retention. (Source: “Corporate Presentation,” Alkaline Water Company Inc, September 10, 2019.)

You can find the company’s products in about 50,000 major retail locations across the United States.

That might sound like a lot (and it is), but alkaline water is not as well-known a product as other water categories (flavored, spring, vitamin, sparkling, etc.). That provides Alkaline Water Company with a great opportunity to promote its products and grow its customer base.

Furthermore, the company’s planned acquisition of AQUAhydrate will see that potential increase substantially.

WTER Stock Information
Market Cap $76.5 Million
52-Week High $5.56
52-Week Low $1.37
Shares Outstanding 41.3 Million
Float 39.8 Million
50-Day Moving Average $1.78
200-Day Moving Average $2.07

(Source: “The Alkaline Water Company Inc. (WTER),” Yahoo! Finance, last accessed September 10, 2019.)

Alkaline Water Company to Acquire AQUAhydrate

The recently-announced acquisition of AQUAhydrate, Inc. will have a big effect on Alkaline Water Company. The deal brings together two of the fastest-growing premium water brands. (Source: “The Alkaline Water Company to Acquire AQUAhydrate in Transformative Deal that Strengthens National Brand and Product Portfolio,” Alkaline Water Company Inc, September 9, 2019.)

Until CBD-infused products become legal, Alkaline Water and AQUAhydrate each have popular products that will drive revenue.

AQUAhydrate, Inc. has products in more than 10,000 convenience stores. It also has key retail supply agreements with major retailers including Walmart Inc (NYSE:WMT), Target Corporation (>NYSE:TGT), Rite Aid Corporation (NYSE:RAD), and  Kroger Co (NYSE:KR).

And just like Alkaline Water Company, AQUAhydrate is one of the top alkaline water brands when it comes to customer loyalty and retention.

As a result, the partnership should dominate the water retail space across the country. On a pro-forma basis, the two companies expect revenue of more than $65.0 million in fiscal 2020. For comparison’s sake, Alkaline Water Company Inc reported record revenue of $32.2 million in fiscal 2019.

What cannot be overstated is how important Hollywood star power will have on the company. Combined, Combs, Wahlberg, Michaels, Alkaline Water, and AQUAhydrate are expected to have social media reach of 74 million followers.

This exposure and brand recognition make the company more attractive to the investing community, attracting institutional investors and coverage across North America.

Record Q1 Results & Reiteration of 2020 Guidance

On August 8, Alkaline Water announced that its revenue for the first quarter of fiscal 2020, ended June 30, 2019, increased 28.8% year-over-year to a record $10.2 million. In June, the company reported its highest-ever monthly sales of $3.8 million. (Source: “The Alkaline Water Company Reports Another Record Quarter and Reiterates Fiscal 2020 Revenue Guidance of $46 million to $50 million,” Alkaline Water Company Inc, August 8, 2019).

Alkaline Water reported a net loss for the first quarter of $5.1 million ($0.12 per share), versus a loss of $1.1 million ($0.04 per share) in the same period last year. The company ended the first quarter with a cash balance of $10.0 million.

Alkaline Water also reiterated its full-year revenue guidance of $46.0 to $50.0 million and gross margin guidance of roughly $18.0 to $20.0 million.

This guidance does not include any sales that could come from CBD-infused products being legalized, nor does it take into account the announced merger with AQUAhydrate, Inc.

Analyst Take

Alkaline Water Company Inc is on the periphery of the CBD-infused beverage market, but once those beverages become legal, the company should become a dominant player in the market.

Until then, Alkaline Water has a strong and expanding product portfolio, and its retail footprint continues to grow.

The proposed acquisition deal with AQUAhydrate, Inc. will have an immediate positive impact on revenues. Then, once launched, the combined company’s expanded CBD product line should also help juice revenues. And that would likely give a boost to the Alkaline Water stock price.